With effect from 31 March 2016, HMRC’s Shares & Assets Valuation is withdrawing its valuation services for PAYE health checks and ITEPA (Income Tax (Earnings and Pensions) Act 2003) post-transaction valuation checks.
Impact
The reason cited for the withdrawal of this service is SAV’s valuation resources being “severely stretched”. The greatest impact will be for companies operating non tax-advantaged employee share incentive schemes, share as share purchase plans, growth share plans, and joint ownership share plans. Without HMRC’s check service there is a risk of adverse tax consequences if, on a subsequent disposal of such shares, it is deemed that the securities were originally acquired at a discount.
Review
SAV will continue to offer valuation check services for Enterprise Management Incentives, company share option plans, save as you earn share option schemes, share incentive plans, and employee shareholder valuations. However, HMRC has stated it is reviewing, “how these services might be improved”.
Capital Gains Tax post-transaction valuation checks, which SAV operates in conjunction with the Valuation Office Agency, will continue by way of the existing CG34 process.
Tax liabilities
The removal of this check service creates considerable uncertainty for companies undertaking non-tax advantaged share schemes – simply waiting to see if HMRC opens an enquiry is unlikely to be an attractive option. Directors are likely to need some form of comfort on valuations for such share awards to ensure their companies are not exposed to significant tax liabilities.
Burgis & Bullock Corporate Finance has considerable experience in fiscal valuations, including for share schemes. If you would like to discuss this matter further please contact one of our specialists:
Simon Chapman
Corporate Finance Partner
M: 07831 255302
E: simon.chapman@burgisbullock.com
Anne Rose
Head of Tax
M: 07932 743266